Let us explain why it makes sense to have a US fund booster in your portfolio:
1. US companies are expected to grow their earnings
Earnings growth for the S&P 500 companies is expected to be 12.3% and 9.1% in 2012 and 2013 respectively (based on consensus estimates as of 27 January 2012). We expect the much-maligned US property sector to rebound strongly and potentially double US GDP growth, boosting the earnings growth of related sectors further.
2. US companies are cheap
The US market has a historical price earnings (PE) valuation of 15X and based on the earnings growth estimates mentioned above, the forward PE ratios stand at 11.2X and 10.3X for 2012 and 2013 respectively (as of 27 January 2012). This translates to a very attractive discount!
*Based on the current PE estimate of 12.2X consensus earnings for 2012, if the market is to revert back to our 15X historical PE, this implies an upside of 23% this year (data as of 27 January 2012).
3. US companies sell to the world
The US companies do not rely on their domestic market only. For some companies in the S&P 500, sales from outside the US stand at 46% in 2010, and for some sectors such as Information Technology, the number goes up to as high as 56% (Source: S&P Indices).
4. Diversification from other regions
If your portfolio is too concentrated in other regional funds, the US will add a welcome diversification booster. For investors in Singapore, we may tend to have a higher weightage in Asian funds due to our familiarity with the region's growth story, but it is always wise to diversify across regional markets which are not so correlated. In SGD terms, the US market was one of only two markets under our coverage to deliver positive returns in 2011.
We are offering a 50% discount on the sales charge for the following US equity funds, from 1 to 29 February 2012.